Fed Stymied, Needs Congress’ Help to Spur Economic Growth
For the most part US Fed officials have opinions on hot-button issues of the day but do not comment publicly..
But, since the US monetary policy makers are knowledgeable about what is good for the economy, their views on subjects such as immigration, trade and education policy are worth listening up to.
3 of them spoke in St. Louis Friday to the Official Monetary and Financial Institutions Forum, where there were lots of questions about the the Fed’s latest thinking on interest rates.
If you are concerned about the longer-term health of the economy such questions aren’t especially enlightening. The headlines after recent Fed meetings, has been “Fed leaves policy unchanged.”
In fact, there’s a growing sense that the Fed has done nearly all it can to stabilize the economy, and are out of ‘tools.”
St. Louis Fed President James Bullard, Dallas Fed President Robert Kaplan and Minneapolis Fed President Neel Kashkari all buy into that basic story.
If we’re going to move the economy out of its slow-growth rut, other policymakers will have to take the initiative, meaning they are looking at Congress to lead.
The Big Q: Where would these 3 savvy central bankers start?
Mr. Bullard suggested that the nation could benefit from “a coherent macro-oriented immigration policy.” He cited the example of Canada’s points system, which gives skilled immigrants a priority.
“That would be a very positive way to look at immigration compared to the way it’s often described,” he said. “It is a fantastic thing that people want to come to your country. We should channel all that energy to get good macroeconomic outcomes.”
Those workers, he said, often blame globalization for job losses that are brought on by technology. “More than at any time in my career, it’s hard for me to think of an industry that is not being disrupted,” he said. “Amazon is probably a more ferocious threat to people’s jobs than China.”
The problem is that disrupted workers have difficulty finding new jobs. “We aren’t doing a very good job of vocational training,” Mr. Kaplan said. “The system is not working for people. The onus is on leaders to explain what’s going on and develop programs … that help people make the adjustment.”
Mr. Kashkari mostly stuck to monetary issues in his remarks here, but he has previously mentioned immigration as a boon to the economy. In a sense, it is unusual for the apolitical Fed presidents to be speaking about issues that are so politically divisive.
Mr. Bullard argues that they would not be doing their jobs if they were silent on subjects such as immigration and trade. He recently published a much-discussed paper postulating that the US is stuck with below average growth for the foreseeable future.
“Central bankers have said we need help, we need people to understand what we can do and what we cannot do,” Mr. Bullard said Friday. “Maybe this kind of framework will put the spotlight on that. These are the fundamentals, and the fundamentals have to change before we get better economic outcomes.”
The Fed has played the role of Superhero for the past 8 years, fighting crisis and recession while Congress has been deadlocked on important issues. It is time, these Fed insiders argue, to give the Superhero some help.
Have a terrific weekend.